Rebalancing for Sustainable Growth

Asia’s Postcrisis Challenge

herausgegeben von: Masahiro Kawai, Jong-Wha Lee

Verlag: Springer Japan

Buchreihe : Economics, Law, and Institutions in Asia Pacific

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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The Asian model of export-led growth served it well in the post-war period, but prolonged sluggish growth of the developed economies following the global financial crisis, together with growing inequality and rising environmental problems, point to the need for a new growth model. The purpose of this book is to describe the challenges facing Asian economies in the post-global financial crisis environment and to identify structural issues and policies that can help guide Asian policymakers to expand the growth potential of domestic and regional demand in coming years, and thereby create a basis for balanced, sustainable, and inclusive long-term growth. These issues and policies span a variety of dimensions, including macroeconomic policy (monetary, fiscal, and foreign currency management), real sector issues (trade and industrial structure), infrastructure development, labor market and social policy, financial sector reform and regulation, and regional cooperation and architecture.

Key recommendations to achieve these goals include measures to: deepen social protection to support social resilience; increase infrastructure investment to create a “seamless Asia”; enhance productivity in the services sector; establish a region-wide free trade agreement to encourage intraregional trade in goods and services and investment through economies of scale and dynamic efficiency of a larger market; promote a shift to a low-carbon society and support green growth; and deepen and integrate financial markets to facilitate the recycling of Asia’s high savings for investment within the region.

Inhaltsverzeichnis

Frontmatter

1. Introduction and Overview

Abstract

In the past years, Asian economies have become more vulnerable to external shocks. The global financial crisis of 2007–2009 resulted in a huge downturn in export demand, and in some cases, capital flow volatility resulted in turbulence in foreign exchange and capital markets. The export-led growth model which had driven growth of Asian economies showed its limitations and may have aggravated the negative consequences of the global financial crisis for these economies. Asia’s growth path needs to avoid large and unsustainable imbalances and address the widening economic and social divide and increasing environmental degradation that accompanied its rapid economic growth. This chapter argues that Asian economies need a new paradigm for development that will create more balanced growth. This new model would entail not only growth that is less dependent on exports, but also growth that is inclusive and environmentally sustainable. This change will require a series of domestic structural reforms in Asia and intensive regional policy coordination.

Masahiro Kawai, Jong-Wha Lee

2. Crisis Impact

Abstract

Asia’s quick recovery after the global financial crisis raises an important question as to how a region that had suffered during the crisis could make a turnaround and break out of the recession ahead of other regions. This chapter argues that emerging Asia had built up enough resilience through extensive reform of its financial, corporate, and public sectors since the 1997–1998 Asian financial crisis. The region’s banking sector was not heavily loaded with non-performing assets, it did not indulge in acquiring US toxic assets, and maturity and currency mismatches in balance sheets had been by and large under control. Governance, transparency, and the financial soundness of the corporate sector had all improved. On macroeconomic policy, greater flexibility of foreign exchange rate systems softened the impact of the liquidity crunch. Finally, the depreciation of the region’s currencies against the US dollar during the height of the crisis subsequently helped to improve the competitiveness of exports to propel East Asia’s recovery.

Yung Chul Park

3. Improving Macroeconomic Stability

Abstract

Although the initial impact of the global financial crisis on the region appeared limited, Asia was hit hard when the crisis spread to the real sector and caused the volume of world trade to collapse. Policymakers in almost all economies in the region responded to the sharp contraction of output by easing macroeconomic policies. However, the output gaps they faced were quite different, reflecting differences in business cycles. Subsequently, almost all economies in the region experienced a narrowing of the output gap. This chapter draws broad lessons from the recent macroeconomic policy experience of the region’s economies. It reviews and assesses the principal measures taken by Asian and other economies in response to the global financial crisis in the area of monetary policy, fiscal policy and exchange rate/reserve management policies, and provides policy recommendations on how to improve the effectiveness of macroeconomic policies.

Masahiro Kawai, Shinji Takagi

4. Rebalancing Production

Abstract

This chapter argues that Asian economies should move away from growth strategies driven by exports to developed economies. Rebalancing should take place on both the demand side and on the supply side. Well-targeted policies that increase the productivity on the supply side and by targeting regional consumers on the demand side are necessary. To increase productivity, developing Asian countries should leverage production networks to graduate to higher value-added and knowledge-intensive activities. This can be accomplished by investing in human capital to provide workers with marketable skills, implementing appropriate R&D policies to enhance the capacity of firms, and maintaining FDI friendly environments. A region-wide FTA should include full cumulation of rules of origin in order to overcome noodle bowl effects. Infrastructure investment can be facilitated if governments, multilateral development banks, and bilateral financial institutions work together. More open and competitive services sectors would be promoted if policymakers removed distortions that favor manufacturing over services. SMEs could be strengthened if Asian governments were to establish high-level coordinating agencies like SPRING Singapore and develop long-term holistic plans to nurture SMEs. To ensure that the resulting growth is sustainable, new growth patterns should be made more environmentally-friendly.

Willem Thorbecke, Biswa Nath Bhattacharyay, Hank Lim, Gloria O. Pasadilla, Venkatachalam Anbumozhi

5. Enhancing Social Protection

Abstract

While Asian governments have for some time pursued high rates of growth as their primary economic goal, provision of social protection tended to be viewed as an expensive luxury that only rich economies can afford. Most Asian governments, while maintaining a few social programs to assist very poor and disadvantaged groups, have generally considered social protection as the responsibility of one’s self, family, and close community. The chapter examines the status and trends of social protection policies in Asia and the Pacific. It also links social protection and social policy discussion with post-global financial crisis concerns over growth rebalancing. The chapter also discusses long-term policy challenges in this area and provides conclusion and recommendations. The authors argue that Asian countries should capitalize on the opportunity presented by the recent global financial crisis to reform and build up their social protection systems in a financially sustainable manner. In the case of pensions, governments should take actions to ensure the sustainability and adequacy of benefits for the elderly. In low-income countries, governments should concentrate limited resources on social assistance programs that address extreme poverty and basic health and nutrition needs, giving special attention to pregnant women, new mothers, and young children.

Gloria O. Pasadilla, Bart W. Édes

6. Deepening the Financial System

Abstract

Asian countries have done a great deal to improve their resilience to financial shocks and have come through the global financial crisis relatively unscathed, following the lessons of the 1997–1998 Asian financial crisis. However, Asian economies need to study carefully the lessons of the global financial crisis to identify what financial reforms can significantly help to reduce the likelihood and impact of future financial shocks (both external and internal) and enhance the ability of Asian economies to develop sources of domestic demand. This chapter reviews the lessons of the crisis, and how these might best be applied in Asia. It examines measures to improve Asian economies’ ability to prevent shocks from turning into crises and explores strategies to improve crisis management. Crisis prevention requires strengthening of both microprudential and macroprudential supervision, while crisis management requires effective preplanning of coordination and authorities. The chapter also examines ways to deepen regional financial integration, and considers issues related to financing SMEs which are critical to financially vulnerable sectors in most Asian economies.

David G. Mayes, Peter J. Morgan, Hank Lim

7. Forging Regional Cooperation

Abstract

This chapter discusses regional cooperation and architecture issues important for supporting the rebalancing of growth in Asia toward domestic and regional demand. The main topics covered in this chapter are: (i) the provision of foreign exchange liquidity; (ii) implementation of a regional FTA; (iii) cooperation to develop and finance infrastructure investment; (iv) regional monetary and financial institution-building to support regional surveillance, financial cooperation, and integration; and (v) cooperation on exchange rates to help address global imbalances and support the longer-term economic and financial integration of the region. The chapter also argues that Asian economies should play a much bigger role in the global financial architecture, especially the G20.

Chalongphob Sussangkarn

8. Beyond the Crisis: Toward Balanced and Sustainable Growth

Abstract

The global financial crisis of 2007–2009 shattered Asia’s complacency regarding the sustainability of its export-led growth strategy. The sharp decline in the region’s economic expansion in 2009 arising from the collapse in developed countries’ demand for its exports highlighted the need for a more balanced structure for Asian economies that is less dependent on external demand—particularly from the US and the European Union—and more reliant on domestic and regional demand. Asian economies should contribute to global economic adjustment by creating their own growth engines and transform themselves into a large consumer market, while maintaining their competitiveness as the world’s factory. The global financial crisis provided Asian countries with an opportunity to bring regional policy coordination and cooperation to the next level. Asia’s future growth must be balanced, sustainable, and supportive of the global economy. This includes implementing measures to encourage rebalancing of production, expanding social protection, deepening the financial system, and forging regional cooperation.

Masahiro Kawai, Jong-Wha Lee

Backmatter

Titel: Rebalancing for Sustainable Growth
herausgegeben von: Masahiro Kawai
Jong-Wha Lee
Verlag: Springer Japan
Electronic ISBN: 978-4-431-55321-2
Print ISBN: 978-4-431-55320-5
DOI: https://doi.org/10.1007/978-4-431-55321-2